Texas Instruments (TXN) Bernstein 42nd Annual Strategic Decisions Conference summary

Strategic investment and capacity expansion

• Completed a six-year, $20B+ investment cycle focused on expanding 300mm wafer fab capacity, mainly in North America, to support long-term growth and supply resilience.

• New fabs in Sherman and Lehi, with Sherman planned as a mega-site and Lehi focused on embedded processing, are ramping up production and internalization of manufacturing.

• Internalization of embedded production is progressing rapidly, with over 90% targeted to be in-house by decade's end.

• Closure of legacy 6-inch fabs is complete, with all production transferred to modern facilities, reducing overhead and improving efficiency.

• CapEx is expected to decline as the investment cycle ends, supporting higher free cash flow and margin improvement.

Market trends and demand drivers

• Industrial segment rebounded strongly, up 20% sequentially and 35% year-over-year, but remains 15% below its peak.

• Data center segment is now 12% of revenue, growing 90% year-over-year, driven by AI and architectural changes in compute and power delivery.

• Automotive remains near peak levels with mid-single-digit growth, while personal electronics is growing at low single digits and faces memory constraints.

• Robotics, automation, and factory automation are emerging as significant growth drivers, with high content per unit.

• Lead times are stable, with most products at six to twelve weeks, supported by increased inventory and capacity.

Financial outlook and margin dynamics

• Gross margins are recovering, with embedded segment margins rising as more wafers are internalized; overall margins are expected to improve as depreciation declines and utilization rises.

• Focus remains on achieving 10% CAGR in free cash flow per share, with a significant step forward expected in 2026.

• Pricing environment is stable to slightly positive, with potential for price increases in the second half due to inflation and supply-demand dynamics.

• Assembly and test capacity is being internalized faster due to external tightness, with a goal of 90% internalization by 2030, possibly sooner.

• Inventory strategy includes holding more die bank for flexibility and financial efficiency.